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EURUSD forecast for 09.06.2020

June 9, 2020

June 9, 2020

Dollar misses uncertaintyDmitri Demidenko

The correction of the US stock indexes can support the EUR/USD bears

Fundamental analysis is a very flexible tool. The market reacts to the macrostatistics differently in the period of a recession than it does in the period of economic expansion. US strong jobs report for May, which allowed the [S&P 500][1] to enter the green area for the first time since the beginning of 2020, may finally send it down. The stock index has been 47% up from the low hit in March, and it is 5% left to a record high. Besides, the gap between its current values and the median forecasts of Wall Street experts for the end of the year is the widest ever. It is 10%. The doubt in the stock market’s ability to continue the rally results in uncertainty, and uncertainty is a bullish factor for the US dollar.

According to Sundial, traders established fresh bullish positions in the first week of June by buying $35.6 million new call options on equities. In February, when the US stock indexes were hitting all-time highs and the speculative activity was rampant, it was about $28.7 million. About 50% of buyers are small investors. Earlier, when bullish small trader positions made up 45% or more of volume preceded a median loss for U.S. stocks of about 3% in two-month time and 15% in a year.

Dynamics of S &P 500

![LiteForex: EURUSD forecast for 09.06.2020][2]

Source: Bloomberg.

The [S&P 500][1] rally resulted from the huge stimulus and the hopes for a V-shaped recovery of the US economy. Most of the positive has already worked out. According to the National Bureau of Economic Research, the US 128-month expansion, the longest dating to 1854, came to a halt in February. The recession, which is going to be short, also began the same month. The drop in the US unemployment from 14.7% to 13.3% in May makes Republicans in Congress doubt the feasibility and, most importantly, the size of the further stimulus. The US economy is recovering, it reached the bottom and started growing earlier than it had been expected, millions of Americans are back to work. Does it make sense to increase the debt?

The White House, lawmakers, and the Fed have done a great job. The huge fiscal and monetary stimuli mitigated the downturn and can support the rebound of the US GDP. According to the World Bank’s projections, the US economy should contract by 6.1% in 2020, the global growth will contract by 5.2%. When Citi suggested the start of a long-term downtrend for the USD index, it expected the US GDP should be recovering faster than the global growth. The stimulating measures could change everything.

Dynamics of global GDP

![LiteForex: EURUSD forecast for 09.06.2020][3]

Source: Bloomberg.

Therefore, despite the dollar losses in late spring, it is too early to give up on the USD. The bullish factors for the euro and the [S&P 500][1] have worked out. Besides, the uncertainty and the potential escalation of the trade war may result in deep corrections. However, Donald Trump will try to avert a deep fall of the US stock indexes ahead of the US presidential election. Therefore, one could buy the [EUR/USD][4] on the correction.

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Price chart of EURUSD in real time mode

![Dollar misses uncertainty][7]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  2. cdn.liteforex.com/cache/uploads/blog_post/eurusd/spx-09-06-20.jpg?w=30&s=82cc7ae65785319f76924be106195f28
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